Abraaj founder Naqvi faces criminal charges for bounced cheque

The founder of troubled private investment firm Abraaj Group Arif Naqvi is reportedly facing a criminal charge for issuing a cheque without sufficient funds.

A judge in Sharjah is scheduled to rule on the case on Thursday, the Financial Times reported.

Naqvi – who is currently in the UK – and his colleague Muhammad Rafique Lakhani are accused of issuing the Dhs177m ($48.1m) cheque which later bounced, a prosecution clerk told the paper.

The bounced cheque was reportedly used as partial security for loans worth around $300m taken by Abraaj from Hamid Jafar, founder of Sharjah’s Crescent Group, a source told the paper.

Another source added: “Without this loan, Abraaj would have collapsed six months ago.”

In a statement to local media, Abraaj confirmed that “a loan was granted and security provided in a pure commercial transaction”.

“Partial repayment of the loan has been made and settlement discussions are ongoing with the intent to arrive at a satisfactory solution for all parties. It should be noted that the cheques were provided as part of a security package and as such should not have been submitted to a criminal court,” the company said.

Naqvi is being represented in this matter by Habib Al Mulla, executive chairman, Baker McKenzie Habib Al Mulla, it added.

“The loan was given and the cheques were issued in a genuine commercial transaction and should be dealt with in a commercial manner,” he told the FT. “Offers for payment and adequate securities were provided.”

He also told the paper that Naqvi would not attend the hearing and had admitted that the cheque had not cleared.

“We won’t yield to pressure, though there is serious discussion on repayment and we can come up with a solution that is satisfactory to all parties involved,” the lawyer added.

The latest development comes even as Abraaj, the Middle East and Africa’s largest private equity firm, remains embroiled in a dispute with some of its investors over the use of their money in a $1bn healthcare fund.

The group has denied it misused the funds.

On Monday, it was announced that the co-chief executives of Abraaj Investment Management Ltd (AIML) are stepping down from the board of the unit.

“Abraaj is surprised by the excessive media interest which comes at a sensitive moment in its restructuring efforts and sale of the Group’s regional fund business to Colony Capital,” the company said in a statement.

“We believe deliberate efforts are being taken to destabilise the positive developments that the group and its Joint Provisional Liquidators have been working very hard to secure,” it added.